Virgin Media O2 could raise over £1 billion from towers sale

Virgin Media O2 is shop windowing its UK towers business, courting the attention of would-be investors interested in a deal that could bring in well over £1 billion.

The UK operator has begun a process that, if successful will see it offload at least half of its stake in Cornerstone, the country’s biggest telecoms towers company, the Financial Times reported on Thursday, citing an unnamed source close to the situation.

Clearly VMO2 is keen for the industry to know that its towers are up for grabs.

The telco has sent out details of the sale to potential bidders and will follow up with RFPs imminently, the source said, adding that it has appointed Goldman Sachs and JPMorgan to oversee the process.

Should it all go ahead as reported, the towers sale could be a nice little earner for VMO2. Much will depend on the size of stake it chooses to sell, of course. But the FT puts the value of the whole Cornerstone business at £3 billion, and VMO2 owns half of that, the other half being in the hands of Vodafone, which transferred its stake to its Vantage Towers unit two years ago ahead of its IPO.

It doesn’t take a maths whizz to work out that selling half of its holding would bring in £750 million for VMO2, while offloading the whole stake could raise in excess of £1.5 billion; the FT’s source notes that for the telco to exit the business entirely it would have to broker a deal with something of a price premium.

The assumption is that VMO2 would use the cash to help fund its network rollouts, and that’s probably a pretty safe bet. When it officially launched as a merged entity in mid-2021, VMO2 pledged to spend £10 billion over the next five years. It is upgrading its HFC network to fibre and on the mobile side is, of course, engaged in 5G rollout, none of which comes cheap.

Selling off passive infrastructure assets and businesses is by now a well-trodden path in this industry, as operators seek to release cash to deploy elsewhere. While some operators have sold out of towers altogether as part of debt-reduction efforts and so forth – Telefonica and CK Hutchison being prime examples in the past couple of years – others have elected to retain a presence, attracted by the longer-term potential of the passive infrastructure space as networks become denser.

Deutsche Telekom said as much when it sold a 51 percent stake in GD Towers last summer, while Vodafone brokered a co-control deal for Vantage Towers in November.

It’s not yet clear which path VMO2 will choose, presuming it goes ahead with the sale. Ultimately, its final decision will probably come down to price.

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